SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, DC
20549
FORM
8-K
Current
Report Pursuantto
Section
13 or 15(d) of the
Securities
Exchange Act of 1934
Date of
Report: December 10, 2010
MSGI
SECURITY SOLUTIONS, INC.
(Exact
name of Registrant as specified in charter)
|
Nevada
|
0-16730
|
88-0085608
|
|
(State
or other jurisdiction of
|
(Commission
File No.)
|
(I.R.S.
Employer
|
|
incorporation)
|
Identification
No.)
|
575
Madison Avenue
10th
Floor
New York, New York
10022
(Address
of Principal Executive Offices)
212-605-0245
(Registrant's
telephone number, including area code)
Item
4.02(a) Non Reliance on Previously Issued Financial
Statements
We are
filing this Form 8K to notify you to no longer rely on the unaudited financial
information for the periods ended December 31, 2009 and March 31, 2010 included
in our Form 10Q’s filed February 22, 2010 and May 24, 2010,
respectively.
During
the audit of the annual financial statements included in our annual report on
Form 10-K for the fiscal year ended June 30, 2010, our independent accounts
brought to the attention of management that, beginning in July 2009, the Company
had convertible debt, accrued interest, contractually issuable shares, options
and warrants that, if converted into common stock shares, would exceed the
amount of the Company’s authorized common shares. From July 2009
through June 30, 2010, and beyond, the Company continued to issue new shares of
its common stock and new instruments convertible or exercisable into shares of
its common stock. At each period of time that one of these
instruments was issued, the amount of common shares, which potentially exceeded
the Company’s issuable shares above its authorized common shares
increased. In accordance with the guidance on accounting for
derivatives, the Company valued and recorded a derivative liability that
resulted from these shares issuable in excess of its authorized share capital at
June 30, 2010.
As a
result, after the audit was completed and the Form 10K was filed management
analyzed the impact of the guidance on accounting for embedded derivatives
associated with the excess shares for each of the interim periods, previously
reported, ended September 30, 2009, December 31, 2009 and March 31,
2010. On or about November 19, 2010, management determined that the
derivative issue had an immaterial effect on the interim period ended September
30, 2009, but that the effect on the interim periods ended December 31, 2009 and
March 31, 2010 was material. Management discussed their conclusions
with the audit committee on December 7, 2010. The audit committee
concurred with management’s conclusions. Management
and the Company’s audit committee of the board of directors have also discussed
this matter with the Company’s new independent registered public accounting
firm.
As
a result, management and the audit committee determined on December 7, 2010 that
the Company should restate its financial statements for the three and six months
period ended December 31, 2010 and for the three and nine months period ended
March 31, 2010. Accordingly, the Company’s previously issued financial
statements for the three and six month periods ended December 31, 2009 and for
the three and nine month periods ended March 31, 2010, included in the Company’s
interim reports on Form 10-Q for each of the quarters ended December 31, 2009
and March 31, 2010 should no longer be relied upon. The Company plans to file
amended interim reports of Form 10-Q for each of these periods with the
Securities and Exchange Commission subsequent to the filing of this current
report on Form 8-K.
Expected
impact of the restatement
The
estimated impact of the adjustments to the Company’s balance sheets and
statements of operations are summarized in the tables below. The Company is
still in the process of completing its review of the restated financial
statements, and, therefore, the estimated adjustments described below are
preliminary. The Company expects
the restatement will not
differ materially from the estimated adjustments below.
|
Three
months ended
|
Six
months ended
|
|||||||||||||||||||||||
|
December
31, 2009
|
December
31, 2009
|
|||||||||||||||||||||||
|
As
|
As
|
As
|
As
|
|||||||||||||||||||||
|
Reported
|
Adjustments
|
Restated
|
Reported
|
Adjustments
|
Restated
|
|||||||||||||||||||
|
Total
Liabilities
|
$ | 18,153,452 | $ | 674,040 | $ | 18,827,492 | $ | 18,153,452 | $ | 674,040 | $ | 18,827,492 | ||||||||||||
|
Additional
paid in capital
|
$ | 274,550,380 | $ | (1,499,621 | ) | $ | 273,050,756 | $ | 274,550,380 | $ | (1,499,621 | ) | $ | 273,050,756 | ||||||||||
|
Net
loss
|
$ | (2,921,200 | ) | $ | 1,117,400 | $ | (1,803,800 | ) | $ | (6,170,136 | ) | $ | 825,581 | $ | (5,344,555 | ) | ||||||||
|
Basic
and diluted loss pre share
|
$ | (0.06 | ) | $ | 0.02 | $ | (0.04 | ) | $ | (0.15 | ) | $ | 0.02 | $ | (0.13 | ) | ||||||||
|
Three
months ended
|
Nine
months ended
|
|||||||||||||||||||||||
|
March
31, 2010
|
March
31, 2010
|
|||||||||||||||||||||||
|
As
|
As
|
As
|
As
|
|||||||||||||||||||||
|
Reported
|
Adjustments
|
Restated
|
Reported
|
Adjustments
|
Restated
|
|||||||||||||||||||
|
Total
Liabilities
|
$ | 20,398,249 | $ | 4,392,767 | $ | 24,791,016 | $ | 20,398,249 | $ | 4,392,767 | $ | 24,791,016 | ||||||||||||
|
Additional
paid in capital
|
$ | 277,015,165 | $ | (4,784,339 | ) | $ | 272,230,826 | $ | 277,015,165 | $ | (4,784,339 | ) | $ | 272,230,826 | ||||||||||
|
Net
loss
|
$ | (4,367,368 | ) | $ | (434,009 | ) | $ | (4,801,377 | ) | $ | (10,537,503 | ) | $ | 391,572 | $ | (10,145,931 | ) | |||||||
|
Basic
and diluted loss pre share
|
$ | (0.08 | ) | $ | (0.01 | ) | $ | (0.09 | ) | $ | (0.23 | ) | $ | 0.01 | $ | (0.22 | ) | |||||||
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
MSGI SECURITY SOLUTIONS,
INC.
|
|||
|
Date:
December 10, 2010
|
By:
|
/s/ Richard J. Mitchell, III | |
| Name: Richard J. Mitchell, III | |||
| Title: Chief Accounting Officer | |||